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Treasury 4.0. – Whoever hits the brakes, loses

Treasury 4.0. – Whoever hits the brakes, loses

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Digitalisation is moving forward at a breath-taking speed. Digitalisation not only embraces the processes and systems relevant for Treasury but also the entire business, including the business model. It's no longer a case of major players gobbling up smaller players but rather the fast eating up the slow. Only those managing in real time, with direct access to relevant data, can withstand the competition.

So this is the issue: if the above is true, namely that it comes down to speed – both the speed to react to changes and the speed to create the conditions for rapid reaction – then we have an inherent disadvantage as changes in Treasury tend to be very slow and take a considerable period of time.

Let's take an example from real life: the finding in favour of centralising payments and shifting these to a Shared Service Center occurs in t0. A feasibility study is intended for Step 1; this is to take two months. A consultant is to be involved for this purpose; selecting the consultant takes approximately one month. Accordingly, the outcome is expected in three months. Typically there are delays, either in awarding contracts or due to the inevitable involvement of employees from other specialist departments, as a result the outcome is now expected in four months. The outcome: implementation makes sense, i.e. the project will lead to a reduction in costs and an improvement in compliance.

However, the outcome turns out to also be fragmentation of the banking landscape, no bank account management and that restructuring of the accounts makes sense so that not all accounts with an unmanageable number of local formats need to be linked; otherwise the business case would explode. So after a long period of consideration, the first decision is to introduce order to the banking and account landscape. This brings us to the end of the fifth month.

A request for proposal for bank selection is prepared and dispatched; returns are evaluated and talks and contract negotiations are conducted with banks. This takes roughly two months, which brings us to the end of the seventh month.

The global footprint of the business and the bank's KYC processes result in the full implementation of the new account structure being anticipated in six months time at the earliest based on the current timetable. Delays of two months are plausible; holidays at banks and within the business take their toll. The outcome: after fifteen months, the new bank account structure is in place. In the meantime, a bank account management system has been selected and the implementation will begin in t12 – this will take six months.

Our observation: after 18 months, the BAM system and the new account structure are in place. What is now missing is the establishment and roll out of the central payments platform – with or without "payments on behalf of" but in any event with intercompany invoicing. The length of time for the last company to go live: at least 18 months. All in all and without major delays, the project takes 36 months.

36 months – from today's perspective that would mean June 2020. Let's now take a theoretical step back to June 2014. And consider everything that has happened over this time period – from the technical, political and economic perspective.

What would a faster route look like? As consultant, it would not be up to the task to say "buy in expertise and resources" as it's not always a question of expertise. Moreover, additional resources cannot expedite a project if the methodological approach is wrong. The way forward is rather to seek out the factors that weigh down a project with complexity – thus extending the time frame beyond what is acceptable.

Where is the complexity in the hypothetical project described above? What wastes time?

Sequential working: An insight into what needs to be done generally already exists in t0. The target image is clearly recognisable from its key features. So why introduce a feasibility study? All participants are aware that the account structure needs to be optimised. All recognise the risks of a decentralised payments structure. Business cases can be prepared within a few days. The target image for the system landscape architecture can already be discussed and developed at this point, as it is largely independent of the final account structure. In addition: it replaces the old-school static selection process, which is not compatible with the approach of an essentially dynamic IT landscape design process. The same applies to strategic key features, such as bank connectivity and formats. So what's the reason for waiting 18 months? Is it not possible to prepare a business case, outline a target design (IT processes, etc.) and, parallel to this, implement a transitional solution in which a third party takes on the format conversion. This may not be the most elegant solution or one that is viable over the long term, but it is worth considering from the cost/benefit perspective and, most of all, from the time perspective.

Length of time for decision-making: those who make no decisions, make no mistakes. Wrong! In times of change, not being guided by speed (while not disregarding diligence) can come back to haunt Treasury, particularly if other parts of the company are rolling forward and Treasury is not keeping up. There is no solution that is 100% perfect. That said, there is doubtlessly a robust state-of-the-art technology that is suitable for the time being. So be bold – make a decision.

Lack of focus on cost efficiency: a long project duration means that benefits can only be realised at a much later point in time. By taking parallel project steps, using external resources, service providers or by changing the internal prioritisation of tasks, benefits can potentially be realised more rapidly.

Project fatigue: Will your employees be more motivated if they know that they have 36 months of project work ahead of them? In part, alongside their day-to-day work? Are they more likely to be enthusiastic if they know that the time frame is 18 months and that the peak strain period will be shortened to three to four months.

Well then? One can naturally continue to work sequentially, only implementing that which is feasible using internal resources; in doing so, the in-house organisation will not be pushed to the limits of endurance – the one step at a time approach – but we're inclined to concur with Mario Andretti, former Formula 1 and IndyCar driver: "If everything seems under control, you're not going fast enough".

Oh, I almost forgot the key point: the example with payments is just one of several issues. In parallel, there is also an automated, dynamic reporting function; cooperation with Controlling and Tax; upgrading the Treasury Management System and developing it further in the direction of exception-based management; and IFRS 9. Not forgetting: optimising liquidity planning. As – oddly enough – the business model is in a state of flux and cash flow is no longer doing what it is supposed to do.